Johannesburg - Durban-based Illovo Sugar, Africa's biggest producer, plans to raise output by 50 percent to nearly 3 million tonnes in the next five years to cash in on new tariff-free access to the European Union.
"Currently we produce just under 1.9 million tonnes of sugar. We're hoping to bring on another 900 (thousand) to a million tonnes over the next five years," managing director Graham Clark told Reuters in an interview.
Illovo, 51 percent owned by Associated British Foods (ABF), announced a rights issue in July to raise up to 3 billion rand to finance growth, which will see it expand operations in Zambia, Mozambique, Swaziland, Malawi and Tanzania.
It is also reaching beyond its southern African footprint with a new plantation and mill in the West African country of Mali that will produce 200,000 tonnes of sugar a year, as well as electricity via a spin-off biomass power unit.
Clark said the impetus for the growth was a shake-up, unveiled in 2005, of the European Union's heavily regulated sugar sector that will allow the world's poorest countries quota- and tariff-free access from October 1 2009.
"For the first time ever, the restrictions on who you can supply and what you can supply have been removed. It's tariff-free and quota-free for those qualifying suppliers," Clark said.
The improved access does not apply to wealthier sugar producing countries such as Brazil, Australia and Thailand, whose exports will still be subject to EU duties.
South Africa, where Illovo produced nearly half its sugar in 2008, also fails to qualify as a least developed country.
Clark said the new regime would also allow sugar producers in sub-Saharan Africa to supply higher-value refined products to Europe, rather than the basic raw sugar to which they were restricted in the past.
"If we choose to produce sugar, pack it and put it straight into the supermarkets in the UK or France, we are able to do it. So it's a completely new playing field for everybody," he said.
In April, Illovo announced a joint venture with ABF's British Sugar to provide it with a route into the EU market come October.
The first phase of the expansion, a two-year project to boost output in Zambia from 200,000 to 450,000 tonnes of sugar a year, was complete, Clark said.
The company is also doubling output in Mozambique to 150,000 tonnes and adding another 100,000 tonnes to its Swaziland production.
Its expansion plans for Malawi and Tanzania, where the company made 266,000 tonnes and 127,000 tonnes of sugar respectively in 2008, also included spin-off biomass power generation, Clark said.